Category Archives: Shaikh

Anwar Shaikh’s Capitalism – Notes on Part I, Chapter 4

I recently became aware that Shaikh has provided a lecture series on his book, which you can view on Youtube. Readers of this blog should be sure to watch these lectures to get a better understanding of Capitalism.

I. Introduction

In this chapter Shaikh turns his attention to the characteristics of production, a topic of great importance to classical political economy (and of course to Marx) but one that is largely glossed over in today’s economics, for reasons we will shortly understand. Shaikh starts his chapter with a pithy statement that echoes Marx:

“Underneath the glimmering surface of exchange lie the subterranean tunnels in which is conducted the eternal struggle within production to determine how long and hard labor can be made to work” (120).

Compare this with Marx’s famous transition from the discussion of exchange to production in Capital, Volume I:

This sphere [of exchange] that we are deserting, within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents, and the agreement they come to, is but the form in which they give legal expression to their common will. Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to himself. The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all.

On leaving this sphere of simple circulation or of exchange of commodities, which furnishes the “Free-trader Vulgaris” with his views and ideas, and with the standard by which he judges a society based on capital and wages, we think we can perceive a change in the physiognomy of our dramatis personae. He, who before was the money-owner, now strides in front as capitalist; the possessor of labour-power follows as his labourer. The one with an air of importance, smirking, intent on business; the other, timid and holding back, like one who is bringing his own hide to market and has nothing to expect but — a hiding.

It is in production that the “money-owner” becomes a proper “capitalist,” and we will see that neoclassical economics strives mightily to obscure the human, social relations that this shift implies.

II. Microeconomic Production Process

Shaikh begins this section by stressing two points. First, that “labor is the active agent that operates on materials with the aid of tools to produce output at some later time,” (122) which is contrasted with the “…passive and timeless inputs-into-outputs methodology of most other economic traditions” (120). This point is expanded in considerable detail later in the chapter, where it is shown to have deep and far-reaching implications. Second, Shaikh invokes the classical notion of production vs. non-production labor, a contentious point that Shaikh has some interesting arguments about, but which will be discussed later.

1. Circulating versus fixed investment

This section begins with definitions of the two key terms:

  1. Circulating investment: Expenditures on additional materials and labor to increase production (Made prior to the start of production)
  2. Fixed investment: Expenditures on additional plant and equipment to increase capacity (Also made prior to its employment)

Total investment is made up of these two components. Circulating investment creates new demand, but it also creates new supply at the point of its employment. Fixed investment on the other hand, creates demand but only creates the capacity for new supply. Shaikh argues that both forms of investment are made in order to adjust supply to changes in demand (again, this is not about establishing a static equilibrium, but rather chasing profitability). This linkage to supply is what distinguishes Shaikh’s approach from the Keynesians who treat total investment as exogenous in the long run.

Shaikh then gives a very brief survey of the approaches of other schools to production time:

  • Neoclassical: “…labor and capital appear as coequal ‘inputs’ into the production process, from which output emanates instantly and optimally” (123).
  • Input-Output: Focuses on the ratios of inputs to outputs but ignores labor and production time.
  • Neo-Ricardian: Labor is valued as a determinant of prices but production time is largely ignored.
  • Keynesian: Production responds instantaneously to changes in demand.

Here Shaikh recalls Marx’s observations on the importance of imbalances and interruptions in reproduction. Time becomes meaningful when we account for the possibility of a materials shipment being late, or workers striking during a peak period of production, or financing for a factory falling through, or the gradual appearance of a glut in supply, or the wearing down of equipment as it ages. “Then suddenly the time of production and buffers such as the stocks of inventories and money become crucial to the dynamics of the actual path” (123). Readers of Capital: Volume II will recall that the middle section of that book is deeply interested in these sorts of discontinuities in reproduction.

2. Classical and conventional national accounts

Shaikh begins this section by complaining that standard national accounts begin from the premise that “the creation of utility is the end of all economic activity” (123). This means that they focus on net product instead of total product because it offers an account of the consumption goods that directly provide utility and the investment goods that can provide it in the future. The interest of this sort of theory is tracking value added, and so it does not include intermediate goods in its accounts. Shaikh objects to this focus on utility because utility is a historically variable concept, and because tracking total product can provide a better account of the movement of profits, which are of great importance in understanding the capitalist system. In contrast the classical and input-output approaches focus on accounts of the total product.

This total product is accounted for on the value side as intermediate inputs + value added, and on the use side as intermediate inputs + final product. In other words, the “whole product.” Shaikh justifies this approach as “…important for analysis of the inter-industrial sector, long-run prices, technical change, and the overall relation between production and money flows” (123). The difference between classical and input-output approaches, as stated above, is the issue of production time.

Shaikh proceeds to show how the fact that production started in one year may carry into the next, and how the classical focus on finished production as opposed to the Input-Output approach’s focus on “the sum of finished product and changes in inventories of materials and work-in-progress” (125) leads to drastically different measures of annual national production.

Finally Shaikh emphasizes that the emphasis on time in the classical model leads to differing accounts of circulating capital, which is not tracked directly in conventional accounts, and this leads to an obscuring of the differing roles of circulating and fixed capital. As stated above, investment in circulating capital is associated with increases in output, while investment in fixed capital is associated with increases in capacity. Understandably, in a timeless system this is a distinction without a difference, but in a world with time it is of considerable importance in understanding the dynamics of the capitalist system: “Precisely because production takes time, any change in the level of of production requires a prior change in the materials and labor devoted to it.” (127)

3. Production and non-production labor

Here Shaikh turns to the controversial question of productive and non-productive labor. He clearly states the difference:

All labor draws its consumption requirements from present or past production. But only production labor simultaneously adds to the total product. (128)

So what kind of labor doesn’t add to the total product? It is the sort of labor that “…result[s] in other socially mandated outcomes such as the distribution of goods, services, and money (either directly or indirectly when mediated by exchange), general administrative activities in both the private and public sectors, and various other social activities such as police, fire, military, and private guard labor” (128). So non-productive activities are these sorts of labor, plus personal consumption. This is a fraught issue. For example, Shaikh argues that distribution is unproductive, but in Capital: Volume II Marx argues that it is productive. Shaikh argues (with Marx) that the production of services is productive, but admits that Smith argued that it is not. However, Shaikh does make a good point against the argument of neoclassicals that an activity is productive if “…at least someone would be willing to pay for it” (129) and therefore that the classical theory is needlessly restrictive. He writes:

…from a classical point of view, this change is really a retreat from [the classical] ‘comprehensive consumption’ approach (which treat many activities as forms of social consumption, not production) to the ‘restricted consumption’ definitions of the neoclassicals (which restricts the definition of consumption to personal consumption alone) (129).

Shaikh leaves it to the reader to puzzle out what this means, but we can say that the difficulty that neoclassical theory runs into is in trying to characterize all (non-personal consumption) activity as production for sale on the market, whereas the difficulty classical theory runs into is in trying to characterize certain types of activities as forms of consumption alone and not production. While this point is still abstract, one obvious example of the controversy that the neoclassical approach can run into is its characterization of financial speculation and soldiering as economically productive. Furthermore, its attempt to define everything as a market activity has had pernicious social effects in the neoliberal period, where all non-market consumption oriented institutions like the British NHS were attacked as not fitting the neoclassical model of rationality and therefore in need of “market reform.”

On the other hand the classical approach is no less controversial. Shaikh does not mention it anywhere here, but the characterization of child-rearing and other “women’s work” as unproductive was enshrined in the institution of the Postwar male “bread-winner” who had to “support his family.” Clearly this was not the result of any dominance of classical economics, because neoclassical Keynesianism was the dominant school of thought at the time, but this division of labor into productive and unproductive forms can be used in gendered and harmful ways. Another controversy it can provoke is in its characterization of the work of the state bureaucracy as unproductive. In an age when public sector unions remain a last bastion of the labor movement, the argument that “productive labor” possesses any kind of strategic primacy is understandably unwelcome. Much of the controversy over the work of Nicos Poulantzas hinges on this issue. In the end, Shaikh states that the division between productive and unproductive labor is not the main concern of this book and moves on.

III. Production Relations Versus Production Functions

1. Structural and temporal dimensions of production

In this section we start to see the substance of Shaikh’s critique of neoclassical production theory. To begin with, Shaikh defines the “dimensions of production.” Structurally, the dimensions are:

  • Tools – plant, equipment
  • Materials – raw, auxillary (e.g. electricity, fuel, etc.)
  • Labor

Temporally, the dimensions are:

  • Production time
  • The overall circuit of capital (production time + time to sale)

These dimensions are fairly self-explanatory, so I will not spend much time explaining them. Again, the structure given here follows Capital: Volume II fairly closely, and it is quite interesting that Volume II, which is typically associated with distribution, has so much overlap with the concerns of this chapter on production. That being said, it will not be long before we arrive at concerns of production that should be familiar to readers of Volume I, the volume of Capital most closely associated with production.

Shaikh introduces two more “dimensions” to his model. The first is “the arrangement of shifts,” which refers to how many machines in a plant are used in a day (extensive plant utilization), how long each machine is operated (extensive machine utilization), and at what speed the machine is operated (intensive machine utilization). If we select the maximum of each of these mechanical dimensions we get an “engineering” maximum determined by mechanical limitations. However, these machines usually need to be operated by workers, working on shifts. Shaikh gives the example of a machine that can be operated at maximum speed for 20 hours a day. This machine could be worked by one-crew on a 20 hour shift, two crews on two 10 hour shifts, and so on. This may seem to be an irrelevant distinction, because in any case the machine is worked for all 20 hours, but in fact this arrangement of shifts is deeply significant for production.

The reason for its significance starts to become clear as we come to the next dimension. If we do not assume that the machine is worked at maximum intensity for the maximum length of time, but instead that the length and intensity of its employment is limited by “the relation between the productivity of labor and the length and intensity of the working day” (131). Here Shaikh cites Marx and Braverman’s famous studies of this subject, and notes that “[b]oth of these aspects of the labor process have always been a matter of great contention between employers and employees…and have an important theoretical place in analyses of the labor process” (131). However this somewhat understates the point that he will eventually make, which is that the social relation between capital and labor is the single most important factor in the consideration of production, and that mainstream theory deliberately represses the significance of this relation at the conceptual level. This “conceptual violence” has a long and dark history, and I will return to discussing it as we continue.

2. Social and historical determinants of the length and intensity of the working day

This section is mostly made up of a collection of historical data about the working day, but it begins with a theoretical point. Shaikh argues that the struggle between capital and labor over the length and intensity of the working day is a struggle between “…the power of capital, embodied in and expressed through the machine…” and “…the resistance of workers through rebellion and sabotage…” (132). By looking at the history of the “…length, intensity, and average or marginal productivity of labor…” we can see that these elements of struggle are not technologically determined. The basic point that Shaikh makes here is that the extent of the exploitation of labor has increased and decreased over time and place despite secular improvements in technology. What this implies is that the terrible exploitation of labor in the Global South is not some kind of objectively determined condition, but is open to a “…constantly changing range of alternatives” (134). However I have to say that this section seems underdeveloped. If the machine is the counterpoint of worker resistence, then why does such terrible exploitation happen in workplaces that are relatively primitive in their degree of mechanization? It could be objected that these outcomes are “…not technologically determined,” but in that case, how is the machine the counterpart of worker struggle? The relation is not made clear.

3. Empirical evidence on the relations between work conditions and labor productivity

This section introduces a point of crucial importance for the following analysis: the “exhaustion point” (134).

…on the whole, we may say that labor productivity rises with the length and intensity of the working day, but at a decreasing rate, and after some point of overextension, it may even decline. (134)

Notably, this pattern differs from the patterns of other production coefficients.

There are coefficients that decline continuously as output rises:

  • The stock/flow coefficient
  • The machine coefficient (machine/output ratio)
  • The machine/labor ratio
  • The machine labor hour ratio

And there are coefficients that are constant with increasing output:

  • The ratio of machine hours to labor hours (“machine services,” “labor services”)
  • The materials coefficient (although it may vary with increasing lighting or heating costs on some shifts)

But there is only one coefficient that displays the distinct pattern discussed above: the labor coefficient.

…the labor coefficient (the reciprocal of productivity) declines with the length and intensity of the working day. For any given level of intensity, the labor coefficient falls at a slowing rate as the length of the working day (and hence output) increases, yielding a curve that tends to flatten out at the end of a given shift. (135)

In other words, only labor has an “exhaustion point” that inflects its productivity pattern. This particularity has a decisive influence on the structure of productivity patterns.

IV. Production at the level of a firm

1. Work conditions and “re-switching” along the microeconomic production possibilities frontier

To begin this section, Shaikh raises the issue of engineering capacity, and what output over the course of a working day would look like if there was a single daily shift. In other words, he is pointing out that after we determine engineering capacity we still have to take into account the effect of the varying productivity of labor on output in order to get a conception of what actual output is. As he will do elsewhere, Shaikh is here emphasizing the role of the worker as an “active subject” that should not be reified into an input that is effectively the same as a piece of machinery. His assumption is that “…the productivity of labor rises with hours worked, peaks at the point at which labor exhaustion sets in, and declines thereafter” (135). As an aside, I would note that while this pattern distinguishes the worker from a machine, it does not distinguish them from an animal (e.g. a workhorse). The “active subjectivity” of the worker is only partially expressed here, and is more fully expressed in the worker’s ability to determine the length and intensity of the working day through their struggle with capital. The workhorse can complain of overwork and make some forms of protest, but it is not able to establish concrete limits out of a wide and largely arbitrary set of options. In doing so, workers are able to exercise and establish their power as subjects.

Shaikh illustrates the wide variety of possible work intensities with curves depicting maximum physical intensity of work, socially normal intensity, work-to-rule (Working according to the letter of all rules and directives, causing production disruption while being able to claim otherwise), and a full work slowdown. These are shown for the purposes of illustration only.

After going through some of the points about the characteristics of coefficients discussed above in more detail, Shaikh next turns to the “reswitching” problem mentioned in the section title. Neoclassical production theory seeks to define a “production function” that “…gives the maximum amount of output associated with a given amount of inputs” given a certain production technology (137). As mentioned in the discussion of Aggregate Production Function (APF) in the previous chapter, this function must be “monotonic in each input” (138). Therefore “output [must rise] at a declining rate which approaches zero but never becomes negative” (138) and production can exhibit “diminishing returns” but cannot actually decrease. Why? Because if it decreases there exists an alternate combination of shifts that will have a higher output at the point of its decrease but themselves also be sub-optimal at some point (“switching”). Shaikh illustrates this point in Figure 4.5 on page 139. The only type of shift combination (function) that does not have this problem is a combination of two shifts of equal length. However this type of combination does not occupy the maximum at every given length of time and is in any case totally unrealistic as a standard that could exist in the real world or be used to optimize anything. If this micro-economic production function is so riddled with problems, it goes without saying that a “microfoundations” based APF is out of the question.

2. Output and production coefficent under socially determined work conditions

This section restates the point of the prior section in detail that some may find pedantic and others interesting. Assuming the pattern of changing labor productivity over the course of a shift that was discussed above, Shaikh tries every conceivable combination of coefficients that could produce the desired neoclassical production function and finds that the function simply cannot be produced. As he writes:

…we find that no matter how we choose to specify the inputs KR [real capital], L [labor], it is not possible to derive the hypothesized patterns of a neoclassical microeconomic production function…In the face of such results, the only recourse left to neoclassical theory is to simply postulate, against logic and empirical evidence, that any given machine can accommodate an infinite range of workers in exactly the prescribed fashion (147).

This “fairy tale” postulate “gives rise to the illusion that production coefficients are purely technical” (149) when in fact:

…production coefficients are generally not ‘technically’ determined. Technology itself is an eminently social artifact whose shape and character varies greatly across time and space. And even within any given technology, production coefficients generally depend on the specific social conditions under which labor functions. The so-called engineering side of business operations is profoundly social. Finally, even if labor conditions are taken into account, observed production coefficients would still generally depend on prices and costs (149).

The determination of production patterns by the varying characteristics of labor productivity is one social element, but the influence of prices and costs points to broader social connections that also confound the idea of technical determination.

V. Costs, Prices, and Profits

1. Assumed shapes of cost curves in neoclassical, neo-Ricardian, and post-Keynesian theories

In this section Shaikh goes over the three types of cost curves mentioned in the title. These cost curves are important because they determine the level of output that is profitable, and profit-seeking is essential to the survival of capitalist firms.

The first is the neoclassical cost curve, which includes (as mentioned early in the chapter) “normal profit” as a part of fixed costs. What this means is that it includes variable and fixed costs (as normally defined) + the average level of profit at equilibrium. The ideological implications of this definition were discussed above, but neoclassical cost can be seen as similar to the classical concept of “price of production” (cost-price + average profit), but with the additional baggage of the equilibrium concept and the assumption that “normal profit” is a given. Shaikh plots out both neoclassical cost, and the “true average cost” which subtracts the normal profit from fixed cost. Any sales at costs above normal neoclassical costs (including “normal profit”) are taken as evidence of “…’excess profit’ and imperfect competition” (152). To some extent this forms the basis for the Post-Keynesian perspective.

The Post-Keynesian theory of price focuses on the persistence of “monopoly prices” but Post-Keynesians differ in what they consider to be “monopoly prices.” Some use almost the same definition of what the neoclassicals call normal profit, others define monopoly profits as being in excess of normal profits, and some define anything above “prime costs” (Materials costs + Labor costs) as being monopoly profits. This is typical of the Post-Keynesian downplaying of the role of production, treating the margin above prime cost as arbitrary: “…if gross margins are taken to be stable, then oligopolistic prices are independent of demand, so that variations in demand are met by changes in output rather than changes in prices” (152). This is the opposite of Shaikh’s perspective that was mentioned at the beginning of the chapter.

Shaikh’s classical perspective, unlike the Post-Keynesian perspective, accounts for fixed costs, and assumes that firms that survive in the long run make a “normal profit” at competitive prices above the minimum point of average cost. Importantly this normal cost is a long-term normal cost and it is assumed to be won by firms that are profitable and survive competition. These firms are not entitled to their profits.

2. Cost curves under general conditions of the labor process

This section is mostly a mathematical restatement of points made earlier in the chapter.

3. Implications of general cost curves for various economic arguments

The first part of this section addresses neoclassical responses to the cost curves and production coefficients that Shaikh has derived in this chapter. Cost curves are not “U-shaped”, providing no chance for clear optimization. Production coefficients are not fixed, (remember our discussion of shift work) creating yet more problems for the idea of market optimization under equilibrium and the technical determination of production functions.

The first neoclassical response is to treat shifts as “technologies,” retaining the technical determinism of their approach. However “…this stretches things rather far, since the definition of a ‘technology’ now encompasses not only socially determined working conditions but also all potential combinations of wage payment schemes [hourly wages, daily wages, piece work, etc.] and shift lengths, intensities, and premia” (158). Simply stating that something is a technology does not make it so.

The second neoclassical response is to assume 1) That there are no shift premia 2) That labor coefficients are constant across shifts (that is, there is no exhaustion point, etc.) 3) That wages are paid per hour (preventing any step-wise cost structure). This is simply defining the problem out of existence in another direction. Even with these assumptions in place changes in work conditions would change the magnitude of production coefficients, and they only offer a theory of long term production coefficients because that is how the neoclassicals are able to argue that the firm reaches a point of production at minimum cost.

The Post-Keynesian approach uses a variant on the second response in its arguments “…in which material and labor coefficients as well as hourly wages are constant across all shifts…” (158). Oligopoly pricing is assumed to be a result of a markup above the resulting costs. Shaikh accuses the Post-Keynesians of ignoring the existence of reserve capacity in plant and equipment utilization because of their approach that downplays supply-side considerations, conflating it with “excess capacity” and using this as a basis for their arguments about oligopoly.

Shaikh next notes that discreet changes in micro (plant) level capacity utilization do not necessarily imply discreet shifts at the macro level. As he has strongly argued before, there is no need for “micro-foundations” in macro-economic analysis and emergent properties can lead to quite different macro patterns. Finally, Shaikh points out that neoclassical rule of profit maximization according to the use of price = marginal cost (p = mc) is useless because of the shape of cost curves we discussed earlier, which would give us multiple consistent production levels and therefore be of little help. Shaikh argues for the use of the direct as opposed to the marginal calculation of profit.

VI. Empirical Evidence on Cost Curves

Once again, I will leave the reader to examine the empirical evidence, as it is largely consistent with Shaikh’s work and so does not tell us anything particularly new.


1 Comment

Filed under Shaikh

Anwar Shaikh’s Capitalism – Notes on Part I, Chapter 3

I. Introduction

As the chapter title “Micro Foundations and Macro Patterns” suggests, this chapter is concerned with what the relationship between “micro processes and macro patterns” is in a capitalist economy. This is the first chapter where Shaikh begins to present in detail his criticisms of neoclassical economics, and as an autodidact I found a good deal of the chapter intimidating in its details. That being said, Shaikh’s main points are quite easy to grasp and I will present them below.

The obsession of neoclassical economics with “micro-foundations” based on their (hyper)rational choice and expectations model is the main object of Shaikh’s criticism here. We must ask if rational choice is a valid way of discussing individual behaviour, and what that implies for macro-economic patterns. The first question of the validity of rational choice is addressed in some detail in the concluding section of the chapter, but Shaikh’s main line of attack is on the argument that “micro-foundations” have a determining influence on macro-patterns.

The way in which he does this is to model a variety of preference models and show that any of them can be made to conform with widely acknowledeged macro-economic patterns. This implies that the assertion that rational choice is validated by macro-economic evidence is absolute nonsense, as is it performs no better or worse than even the so-called “whimsical agent” model where the consumer makes purchasing decisions at random within their budget constraint (In conforming with the observable macro-economic patterns).

The neoclassical approach is in fact revealed to be doubly bankrupt, as it begins with extremely implausible assertions about individual rationality, looks at macro-economic patterns, and then tries to reconcile its model of individual behavior with the macro patterns. What this rules out is an attempt to reconcile the model of individual behaviour with observed individual behaviour. Therefore neoclassical economics not only places macro-economic analysis in a “micro-foundations” straightjacket, it also impoverishes micro analysis by demanding that it exhibits a unity with the macro-economy that is assumed to hold but does not in fact. Why make all these absurd theoretical contortions?

The real function of the notion of a hyper-rational representative agent is that it serves the mission statement of neoclassical economics, which is to portray capitalism as efficient and optimal. (77)

While the neoclassical socialists of the interwar period, or the market socialists might question this assertion, I think that it does contain a good amount of truth. Neoclassical economics is in the first place a pretension to scientific knowledge of the economy that depicts it in such a formalized and idealized manner that it removes the practitioner from any discussion of messy questions like crises or the social surplus. I agree with Till Duppe that neoclassical economics in its postwar form was primarily an escape from politics into a Cold War institutional/professional legitimacy, not a direct apology for capitalism, but that its idealized and apolitical view of markets came to serve as useful fodder for neoliberal activists and that subsequently it was the political path of least resistance for neoclassical economists to either use their theory as an apology for capitalism or to mostly remain quiet about delicate political questions. As we will see, whatever we attribute their motivation to, the neoclassicals were certainly hostile to some of the primary assertions of Marxist economics.

One final point I want to mention about Shaikh’s introduction is his treatment of individual behaviour. We saw above that Shaikh views the micro and macro as conceptually distinct levels of analysis, and we will get into that in much greater detail below, but if it is true that the macro patterns are “robustly independent” of individual behaviour, then what role do individuals have other than as economic particles that gravitate towards a general pattern? Shaikh has an interesting comment here:

This does not mean that micro processes are unimportant. Micro factors come into their own in determining individual paths, can become decisive if people choose to act in concert to (say) produce a general work stoppage or consumer boycott, and are particularly important in evaluating the social implications of macro outcomes. All of this implies…that a correspondence with the aggregate empirical facts does not privilege any particular micro processes. (77)

As we saw in the case of the determination of the wage rate in the previous section, Shaikh’s theory exists against a backdrop of irregular behavior, and this eruption of individual behaviors (which normally emerge into a fairly regular macro pattern) is one such irregularity. While individual behaviour may have some regularities, they are not treated as the business of the economist. At the same time, while capitalism imposes regularity on individuals in the aggregate (whether or not it does on individuals in particular is left to the sociologists) it is vulnerable to revolutionary irruptions. This irruption of the unpredictable “event” or “singularity” is something that was discussed a great deal in the post-‘68 Marxian literature.

II – Micro Processes and Macro Patterns

1. Representing individual human behavior

Shaikh begins this section with a return to the topic of “hyper-rationality.” As he notes, evidence from “behavioral economics, anthropology, psychology, sociology, political science, neurobiology, business studies, and evolutionary theory” (78) all points to the fact that hyperationality is not a good descriptor of how people behave. Finally: “…as any advertiser could tell us, our preferences are easily manipulated, our responses quite predictable.”

The tendency in neoclassical economics is to admit that people are not in fact hyper-rational, but that this type of rationality can be used as an ideal standard with which to assess our real, “imperfect” rationality. Shaikh rejects this view: “It is a topsy-turvy world indeed when all that is real is deemed irrational” (79)

Weirdly, while this image of hyper-rationality as a perfect ideal beyond this world is a popular one in the neoclassical world, there is also a view of “hyper-rationality as a model of actual behavior” which “plays an instrumental role in the depiction of capitalism as the optimal social system, because (among other things) this portrayal requires that all individuals know exactly what they want and get exactly what they choose.” Why is the absurd claim justified?

  1. Because “real economists” believe it! (The “Ptolemaic” argument from authority)
  2. Because it is a “good approximation” of how people actually behave!
  3. Because it’s a convenient way for getting “analytically tractable results!”
  4. Because it “yields good empirical results!”

However as was mentioned above, getting empirical results does not imply that the theory in question is any better than other theories that also get the same empirical results. Furthermore the claim that neoclassical economics models what people want and how they get it is rendered dubious by the fact that “it is possible to define a person’s interests in such a way that no matter what he does he can be seen to be furthering his own interests.” The utilitarian solipcisms required by neoclassical definitions of self-interest are so extreme that any non-market interaction between individuals (such as caring about someone else) is defined as an “externality” (80). Clearly this is not a good approximation of how people behave.

Next we have the problem of the “transitivity” of preferences. This is another well known problem with the neoclassical preference model, which requires that the agent prefer x over z if they prefer x over y over z. Unfortunately, experimental evidence tells us that this is not how people think.

Another field in which very similar assumptions are dogmatically held is game theory, which has been declared to be “a framework within which one can realistically discuss what is or is not possible for a society.” Unfortunately the definition of player preferences in game theory requires “an infinite regress of entirely correct beliefs” in much the same way that is found in neoclassical economic theories.

In a similar vein, Shaikh attacks the Analytical Marxists for their “anti-dialectical and anti-holistic attempt to ground Marxist notions in neoclassical methodology” which “relies on rational choice theory, game theory, and associated neoclassical mathematical techniques to derive its conclusions” (82). The main problem here is that the Analytical Marxists follow the “micro-foundations” approach and therefore reject the existence of emergent properties, which Shaikh strongly advocates as a theoretical device.

Turning to the question of hyper-rationality as a norm of how people should behave as opposed to a description of how they do in fact behave, Shaikh argues that the dismissal of the social component to rationality in the hyper-rational norm does not make it ideal in any meaningful sense. The “social moron” is not much of an ideal to aspire to, except in one sense: “…it provides the foundation for the claim that the market is the ideal economic institution and capitalism the ideal social form. This is its immanent rationale.” (83) Again, the existence of market socialists and Analytical Marxists problematizes this accusation, but I do believe it contains a good deal of truth.

Using the normative argument, some groups like the World Trade Organization and the World Bank advocate programs of social engineering that will make people behave more like the “social morons” that neoclassical theory idealizes (That is as single-minded narcissistic utility optimizers) through the creation of “market friendly” institutions. However this argument relies on the belief in capitalist market optimality, and so does not have much theoretical or practicla merit. Faced with this problem, advocates of capitalism point to its real progressive role in developing the forces of production, but then have to face its history of “violence, inequality, and persistent state intervention” (84).

In the final instance, the advocates of neoclassical theory will defend it on the ground that abandoning hyper-rationality implies falling back on “a hodgepodge of ad-hoc hypotheses” (84) but as has been amply demonstrated, neoclassical theory is itself based on just such a hodgepodge! This is an interesting point, because it gets at the issue of economics’ “scientific” status. In addition to generally being supportive of capitalism, economists are also attached ot the idea of the scientific character of their work. I believe that this has to do with their institutional interest as a discipline and desire to maintain their social status. While acting as a slavish defender of the actions of the capitalist class certainly can reward an intellectual with a degree of wealth and social status (See for example the writings of Thomas Friedman) it cannot afford them the degree of social recognition among intellectuals and the institutional stability it implies. In order to achieve this stability, economists stake their claim to legitimacy on the scientific character of their arguments. This is just as true of Marx as it is of Walras or indeed of Shaikh. As we will see in the next section, Shaikh will explicitly attack neoclassical economics through a reference to scientific methodology, in an attempt to unseat the neoclassicals’ claim to science and social prestige it implies.

2. Representing aggregate behavior

In this section Shaikh details his objections to the neoclassical idea of a “representative agent” that acts as the bridge between micro and macro economics. He begins by noting that neoclassical macroeconomics rests on two assumptions. The first, that hyper-rationality is a useful way to model individual behaviour, has been addressed in the previous section. The second assumption is that “…aggregate outcomes can be treated as the behavior of a single ‘representative’ hyper-rational agent.” (84) Shaikh dismisses this idea as “simply false,” but proceeded to discuss the matter in considerable detail.

Shaikh’s primary argument is that “The behavior of a whole cannot be characterized by that of any of its constitutive elements because a whole is more than the sum of its part” and therefore aggregate behavior “…is generally insensitive to variations in the individual behaviors…Aggregation is robustly transformational“ (84). If this can be shown to be true, then “micro-foundations” will be simply unacceptable under any circumstances as a method for economic inquiry.

Drawing on physics, Shaikh now gives the example of the Ideal Gas Law. The Ideal Gas Law describes the relationship between a number of properties of gases, and was originally obtained empirically. With the advent of the view that gases are in fact made up of microscopic molecules lead to a reconceptualization of the Law. The result was to think of gases as made up of careening, colliding particles within some container. Describing each molecule’s motion would be next to impossible, yet the aggregate of molecule motion can be described statistically, arriving at the same results as the old empirical method. “The aggregate Gas Law now appears as an ‘emergent’ property of the shaped (i.e., contained) ensemble itself and cannot be reduced to, or deduced from, any single ‘representative’ particle.” (85) This is because the properties that are related in the Gas Law are related as a result of the interaction of the ensemble of particles with the container as a limit. Measuring any one particle would tell you nothing about the properties described by the Gas Law.

According to Shaikh, “[e]xactly the same conclusion applies to economic processes” (85); in the case of consumer theory, instead of a container acting as the “shaping structure” of a gas, the “…budget constraint defined by the level of an individual’s income” provides the constraint that defines the emergent consumption pattern. Studies into consumption patterns in models based on hyper-rational neoclassical agents with varying budget constraints have shown that the simple existence of a variation of income distribution among agents is enough to produce an “emergent” effect, where “the shape of the aggregate consumption function is generally completely different from that of individual functions.” In other words, every agent (even) in the neoclassical model must be exactly identical in order for “micro-foundations” to obtain, but in that case there is in fact only one agent and describing a one-agent model as “macroeconomic” is obviously absurd. Shaikh cites the economist Kirman, who writes that it is “illegitimate [to]…infer society’s preferences from those of the representative individual, and use these to make public policy choices.” Another support taken out of the neoclassical house of cards!

From consumer theory, we turn to production theory, which brings us to the question of the Aggregate Production Function and the so-called “Cambridge Capital Controversy”. In its particulars this is a very complicated topic, but I would first like to state what is at stake in the issue. One assertion that neoclassical economics makes is that the owners of each of the “factors of production” (basically: land, labor, and capital) receive exactly the value of their economic contribution in a competitive market. In this view, the Marxist assertion that workers are exploited through the extraction of surplus value is a priori wrong. Any existence of “exploitation” must be a result of imperfections in competition, not a constituent element of capitalist production as such. As you might imagine, this is a very politically charged issue because it provides a theory of “who gets what and why.” This tenant of neoclassical theory has been used, for example, to justify both the extremely high salaries (if we include “bonuses”) that are paid to high-ranking financiers and executives, and the extremely low salaries that are paid to oppressed groups (e.g. Wal-Mart employees, factory workers in the Global South, social workers) and has been used to justify the gender gap in salaries as well. This is the sense in which neoclassical economics can be called without any exaggeration “bourgeois economics.” In earlier times, the French liberal de Toqueville wrote that it was necessary:

to diffuse among the working classes … some of the most elementary and certain notions of political economy, which would make them understand, for example, what is constant and necessary in the economic laws that govern the wage rate. Because such laws, being in some sense of divine law, in that they derive from the nature of man and the very structure of society, are situated beyond the reach of revolutions.

We can see in the way that neoclassical theory was used to browbeat Thomas Piketty after the publication of his modestly critical (and largely in conformance with neoclassical theory) book, that de Toqueville’s sort of thinking still survives in the economics of our day.

So how can this neoclassical just-so story be justified? One way is with the Aggregate Production Function (APF). As Shaikh notes, Paul Douglas, its creator wrote that “the approximate coincidence of the estimated coefficients [of a Cobb-Douglas APF] with the actual shares received…strengthens the competitive theory of distribution and disproves the Marxian” (86). That is, of course, if the APF is in any way plausible, and this is what the Cambridge Capital Controversy and subsequent debates was all about.

Essentially the APF is intended as a model that describes how each of the “factors of production” receive back what they put into the production process through market distribution. If the APF were generally accepted, it would exclude the Marxist theory of exploitation. The difficulty that the APF encounters is in trying to specify what the “capital” factor of production is, and how it is employed. As the Wikipedia entry states:

…the rate of profit…is supposed to equal the marginal physical product of capital. (For simplicity, abbreviate “capital goods” as “capital.”) A second core proposition is that a change in the price of a factor of production will lead to a change in the use of that factor – an increase in the rate of profit (associated with falling wages) will lead to more of that factor being used in production. The law of diminishing marginal returns implies that greater use of this input will imply a lower marginal product, all else equal: since a firm is getting less from adding a unit of capital goods than is received from the previous one, the rate of profit must increase to encourage the employment of that extra unit, assuming profit maximization.

Piero Sraffa and Joan Robinson, whose work set off the Cambridge controversy, pointed out that there was an inherent measurement problem in applying this model of income distribution to capital. Capitalist income (total profit or property income) is defined as the rate of profit multiplied by the amount of capital, but the measurement of the “amount of capital” involves adding up quite incomparable physical objects – adding the number of trucks to the number of lasers, for example. That is, just as one cannot add heterogeneous “apples and oranges,” we cannot simply add up simple units of “capital.” As Robinson argued, there is no such thing as “leets,” an inherent element of each capital good that can be added up independent of the prices of those goods.

So while labour in theory can be reduced to the common unit of unskilled labour, “capital goods” cannot be reduced to a common unit of homogeneous “capital.” The neoclassical response was to argue that capital goods are rendered homogeneous in their money form. The problem then arises that the money value of capital is in part determined by the rate of profit, and the rate of profit is in turn affected by the employment of capital. Because the money value of capital is not independent from the rate of profit it cannot serve as a proper independent measure of the capital “factor of production.” We therefore have an “aggregation problem” in both physical and monetary terms.

The other major problem with the APF is the “reswitching problem.” Again, quoting Wikipedia:

Reswitching means that there is no simple (monotonic) relationship between the nature of the techniques of production used and the rate of profit. For example, we may see a situation in which a technique of production is cost-minimizing at low and high rates of profits, but another technique is cost-minimizing at intermediate rates.

Reswitching implies the possibility of capital reversing, an association between high interest rates (or rates of profit) and more capital-intensive techniques. Thus, reswitching implies the rejection of a simple (monotonic) non-increasing relationship between capital intensity and either the rate of profit, sometimes confusingly referred to as the rate of interest. As rates fall, for example, profit-seeking businesses can switch from using one set of techniques (A) to another (B) and then back to A. This problem arises for either a macroeconomic or a microeconomic production process and so goes beyond the aggregation problems discussed above.

As we saw above: “A second core proposition is that a change in the price of a factor of production will lead to a change in the use of that factor – an increase in the rate of profit (associated with falling wages) will lead to more of that factor being used in production. The law of diminishing marginal returns implies that greater use of this input will imply a lower marginal product, all else equal…” but because the relationship between the techniques of production and rate of profit is not “monotonic“ (As one goes up so does the other, without reversing direction) the stability of the whole system is undermined. The long and short of the issue then is that the APF does not provide a reasonable model that can grant legitimacy to the neoclassical story of distribution.

The only case in which neoclassical economics can provide a production function is when “all firms have the same capital-labor ratio and the same wage and profit rates.” (87) But in this case there is no “aggregate” production function at all because it is in fact a one-agent model. Just as with the neoclassical consumer theory, the neoclassical production theory is a “…trivial [case], because by construction there is effectively only one agent in each domain.” Therefore even if we accept the “hyper-rational” model, neoclassical economics cannot provide anything more than a trivial one-agent model that is completely static and utterly unrealistic.

3. Aggregate relations, micro foundations, and the question of rigor

In this section Shaikh attacks the methodolgical assumptions of the “micro-foundations” approach. To begin, Shaikh points out that “micro-foundations” is not an accepted standard of rigour in physics, the ur-reference for almost every school of economic thought. He offers the example of the Gas Law, which was accepted before it was derived from statistical thermodynamics, the laws of hydrodynamics, crystalization, and magnetism, which have never been derived from “micro-foundations,” and indeed the theory of General Relativity, which is accepted as rigorous despite not being derived from quantum mechanics.

Next, it is not clear that micro-scale theories are in any sense superior to macro-scale theories. Shaikh points out that a minority of physicists have persisted in attempting to abolish quantum mechanics in favour of a physical theory based on the “macro-level” general relativity. It is not as a matter of course assumed that the micro-level theory is superior to that of the macro level.

Shaikh then returns to the example of the Gas Law, pointing out that “it is perfectly possible to derive empirically supported macro patterns from micro foundations that are known to be false.” (88) The Gas Law is commonly said to be derived from a micro-theory of Newtonian collision of atoms “like billiard balls,” but we know that atoms are not anything like billiard balls, but instead “ethereal quantum-mechanical entities lacking the most central of all properties of an object – an identifiable position.” This derivation of a correct law from false premises is possible because “…the Gas Law is an emergent property which is ‘robustly insensitive to details’.” The interaction of micro entities give rise to the emergent stable properties of the Gas Law at the macro level. As we saw above in the case of consumer theory, macro level patterns can persist wildly different, and often absurd micro-level assumptions. To support his argument in the realm of economics, Shaikh points to Keynes’ argument in favour of “…the unimportance of the assumption of individual rationality for the derivation of economic patterns at the macro level” (89) and points to research by other economists that mirror his own previous demonstration in the realm of consumer theory.

Shaikh concludes the section by writing:

In each of these cases, economic shaping structures create limits and gradients that channel aggregate outcomes: the positive profit survival criterion in the case of the firm, individual economic characteristics in the case of income distribution, and the budget constraint in the case of individual consumer choice. Each of these gives rise to stable aggregate patterns which do not depend on the details of the underlying processes. And precisely because many roads can lead to any particular result, we cannot be content with considering a model valid simply because it yields some empirical pattern. Other facets of the model may yield conclusions which are empirically falsifiable, for which the model must be held responsible.

So the aggreement of a theory with some set of empirical facts is not enough to hold it up as a standard of rigour, broader considerations are necessary. In the face of broader considerations, neoclassical economics clearly does not pass muster.

III – Shaping Structures, Economic Gradients, and Aggregate Emergent Properties

Having thoroughly attacked the notion of the “representative agent” based on “micro-foundations,” Shaikh now attempts to describe what his method based on emergent properties will look like. As was described above, these emergent properities are given their particular characteristics in interaction with “shaping structures.” Here Shaikh returns to the question of consumer behaviour, (See Section II – 1) and investigates two shaping structures:

  1. “A given level of income which restricts the choices that can be made…”
  2. “A minimum level of consumption for necessary goods that introduces a crucial nonlinearity”

Shaikh argues that these two structures provide a basis for explaining the following empirically observable patterns:

  1. “Downward sloping demand curves”
  2. “Income elasticities of less than one for necessary goods and more than one for luxury goods”
  3. “Aggregate consumption functions that are linear in real income in the short run and include wealth effects in the long run”

As in the discussion in Section II – 1, the discussion is supplemented by a simulation involving the following types of agents:

  1. “A standard neoclassical model of identical hyper-rational consumers in which a representative agent obtains”
  2. “A model of heterogeneous hyper-rational consumers in which a representative agent does not obtain”
  3. “A model with diverse consumers in which each one acts whimsically by choosing randomly within the choices afforded by his or her income”
  4. “A model…in which consumers learn from those around them (their social neighbourhood) and also develop new preferences (mutate) over time.”

While we might expect such widely varying models to yield widely different results, in fact “all of the models give rise to the very same aggregate patterns. The essential point is that the same macroscopic patterns can obtain from a great variety of individual behaviors” (90).

Sections III – 1..4

In these sections Shaikh outlines a simple mathematical model to demonstrate his ideas about consumption. In the first section he establishes a two good economy of luxuries and necessities, with a budget constraint that all individuals will have to consume within. In the second section he establishes that according to this constraint demand curves will be “downward sloping.” As the price of a good rises, the budget constraint will move “inwards,” restricting the quantity of the good consumed. In the third section Shaikh accounts for Engel’s Law: “…that people buy proportionately less of necessary goods, and hence proportionately more of other (luxury) goods as their income increases.” (92) Shaikh provides a number of assumptions within his model that could “derive” Engel’s Law, according to whether the minimum consumption of necessities varies with income, the slope between necesssity and luxuries varies, or neither varies. Finally he provides a formal definition of his consumption model, and notes that the results are “robustly insensitive” to models of individual behaviour because they are defined by the “shaping structures” of the budget constraint and minimum level of consumption.

5. Simulations: Insensitivity of aggregate relations to micro foundations

In this section Shaikh provides the details for his simulation of various agent behaviour types, with the introduction of various behaviours, both plausible and wildly implausible having little to no effect on the resulting consumption patterns, which remain determined by the shaping structures as he has claimed.

Section IV – Methodology for Economic Analysis

Shaikh begins this section by introducing the question of the importance of heterogeneity among individual agents. He notes that the heterogeneity of agents does “[invalidate] any notion of a representative agent” (101) but it is not sufficient to explain aggregate consumption behaviour. Shaikh explains the reason why heterogeneity invalidates the notion of the representative agent as follows:

Individual actions underlie market, industry, national, and regional macro patterns. But more aggregate sets have properties not possessed by the individual agents, which means that we cannot model the whole ‘as if’ it were merely one large individual. The representative agent is a convenient untruth.

So in the first place agents are not homogeneous, and modelling them as if they were would be illegitimate. However, beyond this point heterogeneous agents give rise to emergent aggregate patterns that diverge from the representative agent. Yet beyond the point of heterogeneity Shaikh adds that of “shaping structures” such as those that we saw in the previous section (e.g. The budget constraint) that give a form to the aggregation of heterogenious agents. Out of the selection of agents we saw in Section III, three of the agent types were heterogeneous, while only one was homogeneous, but under the influence of the shaping structures that Shaikh specified: “…all four simulation models yield the same demand and Engel curves and associated elasticities” (101). If heterogeneous and homogeneous agents yield the same patterns then the explanatory factor must lie elsewhere – namely in the shaping structures.

Shaikh then notes that even agents whose consumption patterns vary at the micro level converge at the macro level using the same relevant variables – in this sense the macro pattern is precisely emergent. He finally notes that while some “information” is destroyed in the transition from the micro to macro level (The assumptions of what it is that makes heterogeneous agents different, such as variation in income) what is really important is “…the existence of a theoretical connection between consumption and the particular variables that affect it, and some understanding of which of the latter count at the aggregate level” (102).

With this background in mind Shaikh goes on to “…specify five characteristics of rigorous aggregate analysis” (102).

  1. “It should be rooted in some theory of the relevant factors at the micro level”
  2. “It should allow for the fact that only a few of these factors may be relevant at the macro level”
  3. “It should recognize that the aggregate functional form will be quite different form corresponding microscopic ones, whch implies that there is no such thing as a representative agent”
  4. “Rigorous macroeconomists will also keep in mind that there will be many micro foundations consistent with any given aggregate pattern”
  5. “…rigorous economic theory must always keep in mind that equilibration is a hypothesis whose existence, stability, speed, and manner of operation must be explicitly addressed”

So in simplified terms, we need to maintain an awareness of the distinction between micro and macro levels of analysis, the problematic relationship between the two, and we have to think about the real implications of economic dynamics over time. Shaikh concludes the chapter by pointing out how certain aspects of “old-fashioned” macroeconomics does satisfy his requirements for rigorous analysis, using the examples of Keynes, Kalecki, and Friedman.

Section V – Turbulent Gravitation

1. Equilibration as a turbulent process versus equilibrium as an achieved state

Here we return to the issue of dynamics that was brought up as point 5 in the previous section. The main distinction, which was also discussed in the previous chapter, is between the “classical” notion of equilibration as a turbulent process versus equilibrium as an achieved state, which is “the most prevalent notion of equilibrium in both orthodox and heterodox economics” (104). The classical notion is “gravitational” and recognizes than any “exact balance is a transient phenomenon because any given variable constantly overshoots and undershoots its gravitational center.”

2. Statics, dynamics, and growth cycles

Shaikh here is trying to explain how the growth rate can actually be dynamic, but the equations he is referring to are completely foreign to me and I was not able to follow his point.

3. Differences in the temporal dimensions of key economic variables

This section focuses on specifying the length of various economic cycles. The first cycle addressed is that of profit rate equalization between industries. This is a phenomenon that occurs over four to five years, and:

…is driven by the reaction of industrial investment to profitability. The higher the profit rate, the greater is the incentive for firms to accelerate the expansion of output and capacity…Industries with higher profit rates will experience growth acceleration until their output begins to grow faster than their demand, at which point their prices and profit rates will begin to decline. The opposite holds for industries with lower profit rates. Two things follow from this. Individual industry profit rates on nw investment will fluctuate around the corresponding overall average rate. This is the equalization of profit rates. But as the average profit rate on new investment itself fluctuates, so too will the overall growth rates of output and investment in the economy as a whole. (106)

Therefore the profit rates of individual industries are equalized around a moving average over time. There is no achieved state of rest at any point.

Shaikh next turns to business cycles:

  1. Inventory cycles (3-5 years)
  2. Equipment cycles (7-11 years)
  3. Long waves (45-60 years)

The inventory cycle is related to the balanced between supply and demand, while the equipment cycle is related to the balance between capacity and actual output (That is, how much is that capacity used in production). Equipment purchases are made in anticipation of future sales, and inventories of raw materials and work in progress are needed to maintain continuous production. Then there are the inventories of finished goods needed for continuous supply for sale. There are normally divergences between expected/desired sales and inventories, and with these divergences come divergences between production capacity and the amount of production required to maintain inventories. The inventory cycle is the most responsive to supply and demand, and with a length of roughly three to five years, Shaikh takes it as a measure of the economic “short run.”

The equipment cycle is taken as representing “the time it takes for actual capacity utilization to cycle around the normal level” (108) and therefore as representing the economic “long run.”

Next we turn to other cycles. While the financial markets are largely trading in “futures” and other virtual entities, instead of labour intensive goods, they seem to follow long term bubbles. Shaikh unfortunately does not have any more to say about this subject here. Labour markets are “…complicated because of the special nature of labor power as a commodity,” a point that appeared earlier, but which we get more information this time. Because (except in some kind of slavery) humans aren’t generated in response to labour demand “the global supply of labor hours is not demand determined” (108). This is a very obvious point in countries like Japan, where the population is aging visibly before my own eyes despite capital’s protests that this will have dire implications for the Japanese economy! There are some ways that the “local effective supply of labor hours” can be increased however:

  1. Changing workers from the inactive to the active labor force (e.g. Encouraging women to work outside of the home, hiring from the “reserve army of the unemployed”)
  2. Changing workers’ geographical location through emigration
  3. Changing the length and intensity of the working day through overtime or speed-up of the labour process

These offer capital “wide limits” in employing labour, but they are not infinitely wide, as the Japanese situation has demonstrated. We will see more about the labour market a long time from now in Chapter 14, but for now we will have to accept that “…the labour market is likely to be the slowest of all the aggregate markets” (109). Shaikh therefore arrives at the following adjustment speed schema:

  • Short Run (3-5 Years): Commodity marukets, inventory cycle, profit rate equalization
  • Long Run (7-11 Years): Capacity utilization, equipment cycle, labor market

This scheme varies from that commonly accepted in the literature, which is longer and has other determinants.

Section VI – Summary and Central Implications

As in the previous chapter, much of this section is summary, as I have provided in this post! My summary is of course more extensive, but Shaikh does add some new points in his own. There are two points that I think are worth mentioning. The first is Shaikh’s survey of popular approaches to human behaviour in economics. He lists four:

  1. Behavioral theory
  2. Evolutionary theory
  3. Agent-based computational economics (ACE)
  4. Stochastic approaches

Shaikh accuses behavioural economics of “[accomodating] some of the knowledge derived from [broader] behavioral within the framework of standard economic theory” (115). In other words behavioural economics cherry picks “disciplines such as psychology, sociology, anthropology, and neurobiology” for ideas that will not rock the boat.

Evolutionary economics is praised for noting “…that the whole can have characteristics that differ from those of individual elements” and that it has attacked the Spencerian notion of the “survival of the fittest” used to propagandize in favour of “the superiority of market outcomes” but is accused of not offering much of an alternative to the neoclassical paradigm and hewing far too close to it in the case of evolutionary game theory. In particular Shaikh accuses it of assuming that too many evolutionary processes are equivalent to calculation, when in fact they are something quite different.

ACE is attacked for being far too arbitrary and “ad-hoc,” (117) and so falling into the same sort of fallacies that we saw with the representative agent earlier in this chapter.

Unsurprisingly, the “econophysics” stochastic approach is the one that Shaikh approves of the most, as its emphasis on macro patterns and physical metaphors most closely resembles his own work found in this chapter.

One final point of interest is the divide that Shaikh highlights between consumers and businesses in “the classical approach”:

…capital is the dominant force and profit the veritable bottom line of capitalism itself. This leads them back to production, to the surplus product as the objective foundation of profit, and to competition as the means by which profit regulates exchange. It is important to note that profit is a potentially objective measure, subject to constrant scrutiny by the firm’s managers, by the stock market, by the banks, and by the public in general. Profit is the survival condition for firms. Individual firms are punish by extinction if they make persistent losses, and can be threatened even if they merely make lower profits than their competitors. Hence, the constant pressure to cut costs so as to improve their odds of survival. In turn, these individual imperatives give rise to a series of ordering mechanisms such as the tendency to equalize profit across industries. Competition is a war among firms, and it is this, the imposed rationality of warfare, which [is] their objective guiding principle. Individual consumers face no such objective winnowing process. They are, of course, subject to social influences which form the the ‘macro foundations’ of their microeconomic behavior. But within these confines they can operate out of habit, out of tradition, or even out of whimsy. Theirs is the domain of the social-subjective. Hence, in the classical approach, there is a great asymmetry between the treatment of businesses and that of consumers. (119)

This might seem like a great deal of common sense, but it is in stark distinction to the “Walrasian” (i.e. neoclassical) approach, which “insists the consumer and the firm be treated in a perfectly symmetrical manner.” (118) As we saw above, the neoclassical approach can only really deal with one agent at one point in time, and this homogenizing approach is evident in the consumer/business divide as well. Shaikh’s “classical” view does seem to capture more of how life as a consumer is actually lived, with a certain amount of freedom experienced by the consumer as to their choices (limited by their budget). The choices we make as consumers are not a matter of strict ranking and optimization, but they are still limited. However it should be emphasized that this freedom is one that is not only limited by how much of the social surplus we can spend as personal income, it is also limited by the fact that we are shut out of the world of production, finding ourselves embroiled in the “imposed rationality of warfare” that is characteristic of capitalist competition and unable to freely act in this sphere. Capitalist consumer freedom, based on “consumer choice” is therefore the free part of a economic split that runs right through us as individuals. This is part of the limitation that Marx recognized in the capitalist system, and demanded be overcome.

In the next chapter we will turn to a discussion of production.

Leave a comment

Filed under Shaikh

Anwar Shaikh’s Capitalism – Notes on Part I, Chapter 2

In this chapter Shaikh takes empirical data on long-term patters of recurrence and turbulent growth as the point of departure for his study of capitalism. This distinguishes Capitalism from Marx’s Capital, in that it does not begin from an analysis of the commodity form, but rather from a “bird’s eye view” of the history of the capitalist system. Why would Shaikh choose this approach rather than that chosen by Marx? In the first place, it is obvious that in 2016 we have much better access to economic data than Marx did back in the 1860s. Economic history is now a formal discipline with various established institutions and regular funding, and is able to take advantage of the data-collection capabilities of large state and corporate bureaucracies which simply did not exist in Marx’s time. We also have the ability to look back on a longer and more diverse history of capitalism than Marx did. Because of the proliferation of various “varieties of capitalism” and “regimes of accumulation” across geographies and time there is more that needs to be explained.

We can also point to the fact that Marx modeled his introductory approach on that of Hegel’s Science of Logic. As the Stanford Encyclopedia of Philosophy notes: “…being is the thought determination with which the [Science of Logic] commences because it at first seems to be the most immediate, fundamental determination that characterises any possible thought content at all.” Comparing this to the opening of Capital‘s first chapter, we can see the obvious similiarity: “The wealth of those societies in which the capitalist mode of production prevails, presents itself as ‘an immense accumulation of commodities,’ its unit being a single commodity. Our investigation must therefore begin with the analysis of a commodity.” Both Hegel and Marx begin their analysis with what is “immediate” and therefore “appears” or “seems” to be “fundamental.” In the course of dialectical development, we see that what appears to be obvious and simple in fact contains the entire logical structure within itself.

Shaikh takes a rather different approach to his work. He provides a “list” of “long-run economic patterns in developed capitalist countries” that provide a “physiognomy of the system.” He does argue that “Concepts such as recurrence and turbulent regulation arise quite naturally from a scrutiny such as this” (56) but the approach is to argue his point by refering to a list of related examples rather than to focus on a single object and try to tease out its underlying structure by way of considering its contradictions. The advantage of this approach is of course to be able to lay claim to the title of “realism.” By showing that the evidence supports his arguments (and that it does not support the arguments of the neoclassicals) he gains a strong debating position. He is also able to immediately state what the large-scale questions he is concerned with are, unlike Marx who spills a great deal of ink before ever introducing something as fundamental as surplus value to his analysis. While Marx’s logical demonstration is impressive, it requires quite a bit of patience from the reader, to the point that many readers of Capital skip the first chapter altogether. Thankfully, Shaikh’s introduction is much more straightforward.

Section 1 – Turbulent Growth

Shaikh begins his analysis by looking at the history of industrial output and investment in the United States. He chooses the United States for his analysis because “it is the preeminent advanced capitalist country and because it generally has the best available data” (56). The United States demonstrates an “apparently inexorable tendency towards growth” (56) but its growth, whether measured through industrial output or investment is “turbulent” in that it has many ups and downs. Furthermore investment is more turbulent than industrial output in its growth. This is one point that Shaikh will seek to explain. He then turns to examining fluctuations in output: “booms and busts…overshooting and undershooting, in never ending sequence” (58). Upturns in output are associated positively with wars, and downturns with the end of wars. This is a point that was already familiar to Marx, but it is not the underlying cause of the “business cycle” of booms and busts. The most extreme busts are known as “Great Depressions,” and they occurred in the 1840s, 1870s, 1930s, and Shaikh argues, in the 1970s and after 2007 up until the present. He will attempt to explain why these depressions occur in the course of the book.

Section 2 – Productivity, Real Wages, and Real Unit Labor Costs

Next we turn to the history of productivity, wages, and labor costs. As mentioned above, this chapter is a list of topics, so these subjects do not follow logically or directly from the topic of the business cycle and depressions. They are still related, but one could imagine another order of analysis with which to proceed. The last section began with the fundamental fact of long-term capitalist growth, and this section begins with the fundamental cause of that growth – technological progress and productivity growth. As Shaikh argues “Productivity growth is essentially a measure of technical change” (60). Other factors can raise productivity a modest amount in the short term, such as intensifying work or lengthening the working day, but “both of these methods face practical and social limits.” (60) Marx discussed this matter in his analysis of absolute surplus value, but essentially it comes down to the limitations of time, the human body, and the dignity of the worker. At any rate, the long term growth of capitalist productivity is a fact, and generally speaking it has been associated with growth in real wages. However Shaikh notes that this association broke down “in the early 1980s, beginning with the Reagan-led assault on labor and compounded by foreign competition” (60) – these trends of what are commonly called “neoliberalism” and “globalization” initiated a decoupling of productivity and wage growth that is unprecedented in American history (and which forms the current social basis for both Sanders-lead socialism and Trump-lead fascism). This decoupling, Shaikh argues, shows that the relationship between productivity and real wages is mediated by “social and institutional mechanisms” (60). As Marx argued, the wage rate is determined in part by the state of the class struggle. Contrary to the arguments of the neoclassicals, the relationship between productivity real wages is not given, but is subject to “conjunctural” change. This is a thorny issue for any economist, because such turns in the class struggle are not regular or even “turbulently” regular, but are instead exceptional and therefore irregular. As I will note below, this presents significant difficulties for a discipline that wants to emulate the physical sciences.

Shaikh then argues that while “social and institutional mechanisms” can improve the labor’s wage share, “they do so within strict limits” (60). Why? Firms with higher than average total costs will lose out in competition, and labor costs form a very large share of total costs. Furthermore, “at the agggregate level, a rise in real unit labor costs lowers real profit margins.” (61) Looking at the history of real labor costs we see the following periods:

  • 1889-1909 Falling
  • 1909-1929 Stable
  • 1929-1939 Rising
  • 1947-1963 Stable
  • 1963-Present Collapse

It may seem strange that real labor costs rose during the Great Depression, but this was because they remained somewhat stable against collapsing production levels and nominal prices. Shaikh’s real point here is that the “Golden Age” from ‘47 to ‘63 “led to the sense that wages automatically rise alongside productivty.” but the subsequent collapse has shown that this is an illusion and that “the relation between real wages and productivity has always been conflictual and that the balance of power between labor and capital can always shift” (61). Shaikh here seems slightly confused. This was the point he demonstrated in the previous section. The point that he had to demonstrate here was that there are “strict limits” on the rise in real labor costs. The real issue is not that the relations between labor and capital in dividing up the surplus are conflictual, but that the system tends to frustrate any long-term victories on the part of labor because of the limits on labor cost enforced by competition and the profit rate (As we will see, the profit rate is all-important in capitalism). However we do get some more discussion of this problem in the next section.

Section 3 – The Rate of Unemployment

The point discussed here is the relationship between Great Depressions and unemployment. Unsurprisingly, they are strongly associated with one another! However, Shaikh makes the argument that “economic policy and social structures” can significantly moderate these spikes in unemployment. He claims that the low unemployment in the Great Stagflation of the 1970s – 1980s relative to the Great Depressions of the late 19th century and the 1920s – 1930s demonstrates that this is the case. However he also argues that suppressing a depression will both extend its duration and weaken the subsequent recovery. Nevertheless, he argues that this is preferable to a laissez-faire approach because the costs to labor of suffering a sharp depression are greater than those to capital. This is because high unemployment weakens both the bargaining positions of individual laborers over wages and weakens the institutions that support the working class (presumably unions and so on). However, at least from the data presented in this chapter, this argument does not seem to hold. The “golden age” of labor came after the Great Depression, and the catastrophic collapse in wages relative to productivity came in and after the “moderated” Great Stagflation. It will be interesting to see what Shaikh’s detailed arguments are on this point. In any case, if we fill in the gaps, we can conclude that a low profit rate will lead to a depression, and that the depression will weaken the bargaining position of labor by means of unemployment. Therefore there are “strict limits” on the rise in real labor costs. This is the “profit-squeeze” interpretation of the 1973 crisis, which argues that labor’s rising share before the crisis triggered the conditions for stagflation and crisis. It has enormous political implications, as I will discuss at the end of this summary.

Section 4 – Prices, Inflation, and the Golden Wave

Shaikh begins here by noting that “…what we now call ‘inflation’ is a modern phenomenon” (63) as opposed to a natural one. If we look at historical prices indicies, we can see that “It is only in the postwar period that prices levels begin to display a new pattern, one in which they rose without end” (63). Before this, they “were characterized by successive waves of rising and falling prices.” Prior to the postwar period, prices rose and fell in “long waves” and the downswing in these waves were associated with downswing phases, but these falls are not apparent in the prices indicies after World War II.

However Shaikh suggests that we look beyond what is apparent in the price indicies. Why? Because we should not think of money only in terms of national currencies. Shaikh argues that there are three “layers” of money:

  1. Credit money
  2. National currency
  3. Gold (Commodity money)

The most important of these three, what we might call the “fundamental layer,” is gold. Gold’s “…official or unofficial status rests on the health of global commodity circulation.” (63) While all three currency forms compete against each other and can devalue relative to one another, gold forms a “common international standard.” This is not to say that gold is always the most valuable of these three forms of money, but that it is the currency of last resort. For example, when the US Dollar’s stability was called into question by the 2007 crisis the price of gold shot up. When the US Dollar regained international supremacy the price of gold fell. The important point is that the “dollar standard” is not an absolute standard, but exists relative to other forms of money, and to global commodity circulation. With this in mind, Shaikh proposes that we look at price levels relative to the price of gold in the postwar period. It turns out that if we do so the long “Kondratieff waves” reappear, with a downturn coinciding with the Great Stagflation and another with our present crisis. The reason why this happens will be discussed later in the book.

Section 5 – The General Rate of Profit

Following up the discussion of long waves, Shaikh notes that “…waves in growth…[are] primarily driven by the rate of profits.” (65) This makes the rate of profit the fundamental determinant of the course of capitalist development, and so very important indeed! He writes: “The analysis of the general rate of profit will provide us with our point of entry into the macroeconomics of growth and cycles” (65). However, while the rate of profit may be just that important, we have to specify what we mean by it. This gets us into a very messy technical problem that goes back at least as far as Capital: Volume II. A common definition of the rate of profit is “the ratio of total net operating surplus to the total net stock of (fixed) capital” (65). This sounds reasonable enough, but the problem is that at a material level that fixed capital is not of uniform age, quality, and productivity:

So at any moment the capital stock encompasses capital ranging from that which was put into place (say) thirty years ago, to that which came on line only one year ago. Since there is no particular reason why a thirty-year-old plant should have the same profitability as a new one, the overall rate of profit represents the average of the rates of profit on the various vintages still in operation. In this sense, it is a useful guide to the health of capital as a whole. For the same reason, it would not be a useful guide to the future profitability of any investment under current consideration. (65).

So this rate of profit is not useless, but it is also quite misleading when thinking about investment, and investment is of course the leading edge of growth. If you want to know what economists spend their time arguing about, it is often finicky definitional issue like this one. Just visit any Marxist economics blog and you’ll find raging arguments about definitonal issues of this type. Putting that issue aside, we will go with Sheikh’s definition and see where it takes us. The important point about this section is that we do not want to use the “general rate of profit” in order to study investment patterns. Instead we need “some measure of the rate of return on recent investment” which will bring us closer to the decisions that investors make based on recent economic performance. While definitional issues like this one are tiresome and convoluted, they have an enormous effect on what sort of “empirical results” one gets out of research. Data is theory-laden, and the devil is in the details.

Section 6 – Turbulent Arbitrage

This section continues the discussion of the rate of profit. Shaikh begins by noting:

The profit rate is central to accumulation because profit is the very purpose of capitalist investment and the profit rate is the ultimate measure of its success (66).

In this argument Shaikh follows Marx. While capitalists are sometimes referred to popularly as “job creators,” job creation is very much incidental to what they are about. It would be better to refer to them as “profit pursuers” instead of job creators, as that is what they actually do. Their profit seeking investment is what gives capitalism its dynamic character. In seeking profit, capitalists invest in profitable sectors of the economy. Shaikh argues that this ultimately has an “equalizing” effect on the profit rate. This is one of those important concepts that came up in the introduction, and we get our first discussion of it here. So how does this work? The process is as follows:

  1. Investment goes to profitable sectors
  2. Investment raises production
  3. Production increases supply, and therefore lowers prices and profits
  4. Investment goes to more profitable sectors

And the process is repeated ad infinitum. This is “turbulent arbitrage” – “A roughly equalized profit rate is an emergent property: it is not desired by any, yet it is imposed on all” (66). Very importantly, this is NOT a form of equilibrium! Equilibrium is a foreign concept to the sort of economics that Shaikh is defining, and readers would be well advised to not get equalization and equilibrium confused! Shaikh’s inspiration is classical political economy, which as Phillip Mirowski noted in his excellent More Heat than Light is a substance theory, as opposed to neoclassical economics, which is a field theory. The fundamental metaphor is of a growing substance in motion, whereas the fundamental metaphor of neoclassical economics is of a field of forces in equilibrium and rest. For example, consider Shaikh’s statement:

…the movement is a never-ending one, with profit rates always overshooting and undershooting their ever-changing centers of gravity. There is never a state of equilibrium, but rather an average balance achieved only through perpetually offsetting errors. (67)

The “balance” that exists in this system is emergent because it is formed by the interaction of objects that are perpetually out of balance. In Hegelian terms, we might say here that “truth is error as such!” This is the concept of “order-in-and-through disorder” we saw in the introduction. Departing the discussion of physical metaphors, and getting back to profit, we see that “competition..produces a persistent distribution [of profit] around the average” and “…because this process is driven by the movement of new capital, the relevant profit rates are those on new investment. It is these profit rates…which we would expect to see equalized across sectors” (67). When we look at the movement of profit rates across sectors in these terms (of new investment) we see the following:

This is profit rate equalization in its true form: incremental rates that careen in rapid succession from one level to another, and even from positive to negative…(68)

Shaikh argues that this is characteristic of “real competition” where investment decisions are not made with reference to stable rates of profit. This “incremental rate of profit” is what is relevant in explaining the movement of stock and bond prices, and therefore interest rates. It also explains the structure of relative industrial prices, to which we now turn.

Section 7 – Relative Prices

This is a short section that discusses the composition of the prices of commodities. Shaikh argues that the prices of commodities are composed of two parts:

  1. Vertically integrated labor cost
  2. Vertically integrated ratio of profits to wages

These are “vertically integrated” in the sense that they are (to take labor costs as the example):

Sum of direct labor costs + Sum of labor cost of inputs + Sum of labor costs of inputs of inputs

The same structure holds for the ration of profits to wages. Essentially this is the ratio of “labor’s share” vs. “capital’s share” in the price of a commodity. This kind of argument was first made by Adam Smith, and then refined by David Ricardo. Ricardo reckoned that labor costs were 93% of prices on a long-term average, and this idea was ridiculed by the neoclassicals, but Shaikh argues based on his research that Ricardo was not too far off the mark, placing the figure at 87%. This preponderance of “labor’s share” will have important consequences down the line but they are not discussed here.

Section 8 – Convergence and Divergence on a World Scale

In this section Shaikh compares the economic development of different regions and countries between 1600-2000, based on the work of Maddison. What we find is that the capitalist era is associated with a growth in world inequality. While it is true that “…growth in living standards is a characteristic feature of successful capitalist development” (71) it is also true that “…in regions that are tangled in the coils of capitalism, such as Africa and Asia, we find stagnation and even decline for almost three centuries.” The relative rating of regions can change, as with the “western offshoots” (including the USA) overtaking Europe, or Asia surpassing Africa economically in the 20th century, but inequality remains the rule. If instead of looking at regions, we compare the four richest countries to the 4 poorest, we see a pattern of persistent and growing inequality. As Shaikh states:

…capitalist development is not just a matter of unequal gains but gains for some alongside extended periods of loss for others.

This is another important pattern that must be explained.

Section 9 – Summary and Conclusions

Surveying what he has discussed in the chapter, Shaikh writes:

The great debate of the times is about whether these deficiencies [declining share of wages relative to productivity and persistent world inequality] are to be remedied by channelling and curtailing capitalism, or by hastening its spread across the globe…The patterns shown in this chapter, and others yet to be elucidated, are deeply rooted in this system. Social and economic interventions have their say within the limits prescribed by these processes. The theoretical task is to show how they are linked. (74)

This brings us back to those “strict limits” we saw discussed above. The theoretical move that Shaikh is making is like that made by Marx. At first glance it may seem arguing that the contest between labor and capital, or between the “multitude” and the rulers is nothing but a naked power struggle subject to total contingency would be a better way of thinking than claiming that the system imposes “strict limits” on what labor can achieve. Why not shoot for the stars? Yet by taking the “scientific” stance that the system has regularities and “regulates” limits, it is possible to argue that only with a profound revolutionizing of the capitalist system is it possible to secure the wellbeing of the working class over the entire world. The more “conservative” position is simultaneously the more radical one. Whether the reader considers this point of view overly rigid or powerfully motivating is something to consider as we go through the rest of this long journey through the book.

Leave a comment

Filed under Shaikh

Anwar Shaikh’s Capitalism – Notes on Part I, Chapter 1

I will be writing up a (no doubt long) series of notes on Anwar Shaikh’s new book Capitalism: Competition, Conflict, Crises on this blog. The book was not easy to get ahold of in Japan, and so I am only starting my reading today. I hope to be able to present a paper on the book at this year’s Japan Society of Political Economy (JSPE) conference. In an age of highly specialized research, this is a book of unusual and enormous scope, and unlike Piketty’s Capital in the Twenty-First Century it truly does seem to be a worthy successor to Marx’s landmark work. My first impression of the book is that it is aimed squarely at an audience of academic economists, with the intention of having a long-term effect in the academic war of ideas, rather than being oriented to a popular audience of workers and activists. I will try to distill the main points of the book in this blog, but the scope of it is so encyclopedic that I’m worried it will be easy to get “lost in the weeds.” In this sense it seems to be similar to Capital’s volumes 2 and 3. There are points of general interest to be found, but it will take some work to get to them.

Of course, I will start at the beginning because this is my first contact with the text, but writing a summary of an introduction is always a challenge. The introduction to a book is typically written last, so without knowing the contents of the book it is hard to summarize what it is saying. That being said there are a few things I found worthy of comment.

Section 1 – The Approach of the Book

In the first section of the introduction, Shaikh lays out the general intent of his magnum opus. His design is to provide a distinct alternative to the neoclassical account of economic “order and disorder” (3). What is called the economy displays both patterns of regularity, such as “almost constant progress” according to various indicators, and “internal coherence” at the macro level. On the other hand, at the micro, or even at the “meso level” it displays a much more “haphazard” character. This is a world of confused and “entangled” factors: uneven development, class struggle, speculation, state intervention, and so on. Any general economic approach will attempt to account for “these two, equally real, aspects” (3). Shaikh’s intent is to provide a plausible account that is at odds with that given by neoclassical economics.

According to Shaikh, the approach of neoclassical economics is to focus on the patterns of regularity and ignore all the other chaotic aspects of economic reality: “The perceived order of the system is recast as the supreme optimality of the market, of the ever-perfect invisible hand. This optimality is in turn projected back onto microscopic units, so-called representative agents, from whose superlatively rational choices it is said to derive” (4). After this perfect order has been set as the norm, then “disorder” is introduced as a post-hoc attempt to capture some element of reality.

This leads to Shaikh’s more interesting criticism of the Post-Keynesian approach. He argues that the Post-Keynesians, while focusing on imperfections with the economic system, “being…from the same foundation” as the neoclassicals. He calls this “imperfectionism” – a view that accepts that there is some validity to the “perfectionist” base model that is adjusted with the introduction of imperfections to various degrees. In this view Post-Keynesianism is a kind of system of imperfections that cannot provide any fundamental criticism of neoclassical economics.

This brings us of course to Shaikh’s own approach, which does not accept the neoclassical perfectionist approach at all, but instead “develop[s] a theoretical structure that is appropriate from the very start to the actual operation of existing developed capitalist countries” (5). How does he propose to do this? Well he gestures at a lot at theoretical principles, such as a “hierarchical,” yet “multidimensional structure of influences” or “Order-in-and-through disorder,” “turbulent regulation,” “pattern recurrance,” “equalization” and so on, but these concepts remain too abstract in the the introduction to really evaluate.

One point that Shaikh makes that is easier to grasp is his reliance on the ideas of classical political economy. As Shaikh writes: “The principle of turbulent regulation has its roots in the method of Smith, Ricardo, and particularly of Marx” (7). This approach puts a great deal of emphasis on the importance of production and profit in the “regulation” of the of the economic system: “Supply and demand are co-equals here, strutting on the stage in alternating splendor. But, as always, profit is pulling the strings” (7).

Finally, Shaikh notes that he heavily references empirical evidence in the book. No doubt the book’s extreme length is due in part to this reference to the empirical, as it is a large contributor to the length of Marx’s Capital as well. This evidence is not objective, but instead structured by theory in the terms of its collection, compilation, and analysis. Another contributing factor to the length of the book is the author’s extensive engagement with the ideas of other schools of economics. In Capital reading groups, I have often heard participants complain about the length of the book, but the reason given there, that advancing a new theoretical approach requires extensive demonstration of ideas and reference to examples, seems to be as valid in discussing Shakih’s book as it is in discussing Marx’s.

Section 2 – Outline of the Book

This is a very thorough summary of the main points of each chapter in the book. There is no real point to me summarizing these summaries, but I will note that they seem useful for trying to keep track of the thread of the book as the reader goes through it. I will probably be referring back to this section, but at this point it is simply overwhelming.

For those who are interested, Shaikh does respond to Piketty’s ideas in one of the final chapters of the book. If readers are eager to hear about this section I could skip ahead and try to write about it, but I will otherwise be reading the book sequentially.

Leave a comment

Filed under Shaikh